Lump sum orders in divorce

What is a lump sum order?

As the name suggests, a lump sum order is an order requiring a party to pay a lump sum of money to their spouse. This is an order frequently made by the court. They can be made in one single payment, by instalment, or as a series of payments.  

Lump sum order by instalment or as a series of payments

These two options may sound the same, but they are not interchangeable terms for the same payment method. As per Hamilton v Hamilton [2013] EWCA Civ 13, an order for a series of lump sum payments and an order for a lump sum payable by instalments are two distinct types of orders. The label applied to this kind of order can have a significant effect, as an order for a lump sum by instalments can be varied, but an order for a single lump sum or a series of lump sum payments cannot. 

In the recent case BT v CU [2021], the court held that where an order has been made for a lump sum to be paid in instalments for the financial convenience of the payer, this will typically be an order for a lump sum by instalments. In contrast, if a party has been ordered to make various payments for different purposes, this will be an order for a series of lump sum payments.  

The benefits of a lump sum order

The court will typically prefer to make an order for a lump sum payment rather than spousal maintenance, as it can help achieve a ‘clean break’ between the parties. The advantage of this is that it will cut any financial ties between the parties, meaning that neither party will owe any financial obligations to the other and both parties can move on with financial independence.  

Additionally, a lump sum payment can provide financial security to the party being paid. For such parties, it may be a relief to know that they do not have to wait for payment each month and potentially be concerned about enforcing payment at some point in the future. 

Capitalising spousal maintenance

Spousal maintenance may be capitalised into a lump sum payment. This means that future payments are rolled into a lump sum. In addition to the advantages of lump sum payments over spousal maintenance, the paying party will also have to consider any potential drawbacks. For example, spousal maintenance typically ceases once the party being paid remarries. If they remarry after receiving a capitalised lump sum payment, the paying party may end up paying more than they would have if they paid regular spousal maintenance instead. To identify how much should be paid to capitalise the spousal maintenance payments, the court uses the Duxbury calculation.  

If you are considering making or requesting a lump sum payment as part of your financial settlement, contact Vardags today for a free initial consultation with one of our expert divorce solicitors.  

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